Hammond to turn up heat on Brexit rebels in budget speech

LONDON (Reuters) - British finance minister Philip Hammond will use his annual budget speech on Monday to urge his divided Conservative Party to get behind the government’s push for a Brexit deal, or put at risk a long-awaited easing of austerity.

Britain's Chancellor of the Exchequer Philip Hammond appears on the Marr Show on BBC Television in central London, Britain, October 28, 2018. Jeff Overs/BBC/Handout via REUTERS

Hammond, who routinely angers many Conservative lawmakers by calling for close ties with the European Union after Brexit, will offer a glimpse of higher spending after nearly a decade of cuts to many public services.

But he will also say that an easing of the spending squeeze will hinge on London reaching an agreement with Brussels to smooth Britain’s exit from the EU in five months’ time.

“If we don’t get a deal ... we would need to take a different approach to the future of Britain’s economy,” Hammond told Sky News television on Sunday.

“We would need to look at a different strategy and frankly we’d need to have a new budget that set out a different strategy for the future.”

Prime Minister Theresa May has so far failed to rally the Conservatives behind her Brexit strategy, raising concerns that Britain could leave the EU in March without a transition deal.

Hammond could soften an immediate shock to the economy by spending some of the reserves he has built up within the limits of his fiscal rules.

But a no-deal Brexit would probably cut Britain’s annual growth rate to just 0.3 percent next year and in 2020 and push up borrowing, the National Institute of Economic and Social Research, a think tank, said last week.

Britain’s economy has slowed since the 2016 Brexit referendum but not as much as many economists feared, allowing Hammond to announce on Monday a further improvement in the budget deficit.